S&P 'A' rating will cut Pittsburgh's rates of interest
Pittsburgh will realize lower interest rates on future borrowing, thanks to a credit upgrade from Standard & Poor's, city officials said on Friday.
The bond rating agency on Thursday increased the city's credit rating three steps to “A,” the agency's sixth-highest level, citing “improved financial management and planning, consistently favorable budget performance and strong reserves and liquidity.”
“It gives us lower borrowing costs, better access to the markets and better confidence from the business community,” city Finance Director Scott Kunka said. “The triple upgrade, you don't see that too often.”
Two other major agencies, Fitch Ratings and Moody's Investor's Service, rate the city as “A” and “A1,” respectively. A1 is one step higher than A.
City officials said the agencies recognize that Pittsburgh's financial state has improved dramatically from the days of junk bond status in 2004. The city has had balanced budgets for the last six years and reduced debt from about $824 million in 2006 to $581 million at the beginning of 2013.
The upgrade also bodes well from a marketing standpoint, said Jeremy Waldrup, president and CEO of the Pittsburgh Downtown Partnership. He said companies research credit ratings before deciding whether to invest in the city.
“I think it helps with the perception of the city with respect to its management,” he said. “When you're a corporation looking potentially at making an investment in this region, I think it's good to know that we're being managed in a prudent manner.”
Kunka said the upgrade came after a conference call on June 18 with Standard and Poor's.
Pittsburgh still has employee pension liabilities of $1 billion and remains under financial oversight of the state-appointed Intergovernmental Cooperation Authority and Act 47 recovery team, the bond agency noted.
It also said the city's long-term prospects are good because of a diverse economy.
“You have Wall Street agreeing that Pittsburgh is improving and is a lower-risk investment,” said City Council Budget Director Bill Urbanic.
The Act 47 recovery team has recommended that the state Department of Community Development release the city from fiscal oversight. The ICA would retain state authority to approve city budgets.
Bob Bauder is a staff writer for Trib Total Media. He can be reached at 412-765-2312 or email@example.com.